Microsoft Reorg Rumors Heat Up

With Windows 8.1 just a few days away, rumors of an impending company shakeup have gained momentum.
10 Hidden Benefits of Windows 8.1
10 Hidden Benefits of Windows 8.1
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Last October, Microsoft CEO Steve Ballmer wrote in his annual letter to shareholders that the software giant would be transitioning into a "devices and services" company. Microsoft already has made good on this promise in many ways, such as the introduction of its Surface tablets, the first of the devices to which Ballmer ostensibly referred.

But according to new reports, the CEO has even bigger changes planned, namely the first company-wide restructuring of his tenure. The new hierarchy, which could be revealed as soon as July 1, could leave many key executives looking for new jobs.

The timing adds a new level of intrigue to what was already shaping up to be a busy few weeks for Microsoft. On Wednesday, the company will unveil Windows 8.1 at its Build conference in San Francisco, and on July 7, its Worldwide Partners Conference will kick off in Houston.

Citing "numerous sources," All Things D reported Sunday that many Microsoft executives are bracing for departures. Ballmer's planning team has allegedly included only a small group of his direct reports and a handful of board members, and the exclusivity has evidently stoked fears among those on the outside looking in.

"It feels like it is going to be titanic -- that Steve is doing this change for his legacy," a person "close to the situation" told the website, which said Ballmer might share the plan internally by the beginning of next month but that the timing of a public announcement isn't yet clear.

[ What's in the forecast for Microsoft's Build conference? Read Microsoft Build: 7 Things To Expect. ]

Bloomberg reported earlier in June that Ballmer's plan will redistribute Microsoft's businesses, which are currently spread across eight divisions, into four units: enterprise businesses, hardware, applications and services and operating systems.

Sources told The Verge, meanwhile, that the new structure will to some extent merge the Windows and Windows Phone groups. Such a move falls in line with Microsoft's perceived strategy to create a "write once, deploy everywhere" ecosystem, or something like it, by unifying its modern platforms around a common kernel. That vision is moving incrementally toward fruition, and the next steps will likely be among the topics discussed at Build.

Though specific reorganization rumors have flared only in recent weeks, signs of a shakeup have been emerging for months. The status of Azure as a major cloud player, for example, has been a sign of the company's new diversity as a service provider, as has its transition of standalone Office licenses to Office 365's subscription-based, cloud-tethered model. Windows 8, meanwhile, also fits into the "devices and services" plan because of Surface and the pretense behind its massively overhauled UI: to establish a presence in the BYOD and consumerization movements that had been funneling Apple and Android devices into Microsoft's enterprise turf.

But there have also been plenty of behind-the-scenes indications. Earlier in the year, Wall Street commentators were questioning whether Ballmer should be replaced, citing Windows 8's underwhelming debut along with the company's relatively stagnant stock value. It's not surprising, therefore, that Bloomberg links investor pressure to Ballmer's plans. That said, the company's stock has been up since April, when Microsoft announced healthy third-quarter earnings.

For a company as big as Microsoft, Wall Street debate is par for the course, but the departure of several key execs has provided further evidence that something is brewing in Redmond. When Windows chief Steve Sinofsky, arguably the most prominent person to leave, abruptly quit in November, industry observers immediately began speculating that larger changes were coming. The new reports add context to Sinofsky's departure and validate some of those early reactions; according to Bloomberg, Ballmer's plans were already in motion when the Windows boss left.

Microsoft also has appeared eager to pursue major acquisitions and partnerships, a further indication of the machinery that Ballmer is rearranging behind the scenes. Redmond teamed up with Oracle on Monday, for example, to bring support for Oracle's database software to Hyper-V and Azure. Rumors also have suggested the company might buy Nook from Barnes & Noble. Other reports indicated that Redmond considered but abandoned plans to purchase Nokia, and to launch an e-commerce business in the mold of eBay and Amazon.

The moves all fall into Microsoft's stated plan to invest $10.1 billion in specific technology "megatrends:" cloud, social, mobility, big data and touch. Microsoft is hardly the only company that sees the opportunities in these areas, however, and Ballmer's new structure, once it is disclosed, might reveal how Redmond plans to navigate the crowded field.